Of Mice and Men and Economists

The economy. Panic. Dismay. Every pundit seems to be singing "It's the End of the World as We Know It." They are correct, but I suspect for the wrong reasons. The free market, I once read, is based on four primary economic freedoms: to try, buy, sell, and fail. In other words, to start an endeavor or business, exchange goods and services without regulation, and to fail in an endeavor or business. These elements have been steadily eroding for some time, but the abolition of the ability to fail is perhaps the most startling. For one thing, someone will end up paying. If Wachovia goes belly-up, either its shareholders or the taxpayers are going to take the blow. The shareholders will be more cautious about investing in future companies with unsound loaning policies. The taxpayers are basically sheep unable to trace their shrinking paycheck's use to the bailing out of a failed enterprise. When "government money" is used, no incentive is provided to exercise greater caution or better policies--we hear only the promise of "oversight." We can attempt to control industries, or we can let them fail, learn, and rebuild.

We have chosen the former. Welcome to the U.S.S.A.

Why? Because we are desperate to "fix something." I find it ironic that we would actually rather believe that there is some fundamental flaw in the most effective economic system ever devised than admit we were fools. We built our lives, spending habits, and borrowing policies (on both sides of the loan) on money that was not there. Now, instead of allowing the economy to shrink to what is probably a size more reflective of our actual production, we are trying to loosen the money supply (through deficit government spending and cutting the Fed rate) to the level it needs to be to support our old habits.

We will regulate the economy to continue an illusion of wealth. We will skewer, as thoroughly as possible, those who practiced sound policies by handing their money to those who did not. We will scramble to "repair the damage."

We will wonder, in twenty years, why this is happening again.

I am not an economist. I also do not have five pounds of cream cheese between my ears. Sometimes I wonder about those we elected to lead us.